In a new
post, he takes aim at the suggestion that comparing the two
recoveries is somehow unfair because Obama had to deal with the
aftermath of the housing bust, whereas Reagan didn't.

Pethokoukis writes:

The reality: Housing is usually a key contributor to GDP growth
during the early stages of a recovery. As a 2011 St. Louis Fed analysis points out, “Somewhat
surprisingly, the housing component of GDP (more formally
known as residential investment) tends to be a solid
contributor to GDP growth during a recovery. Historically,
residential investment has contributed only about 5 percent
of GDP—a small share considering the consumption component
is close to 70 percent. Nevertheless … it can
contribute substantially to the GDP growth rate for short
periods of time.”

But here’s the thing: Subtract the housing rebound from
the Reagan Recovery and GDP still grows twice as fast as during
the Obama Recovery. For example, the economy grew 7.2
percent in the second full year of the Reagan Recovery. Without
residential investment, it would have grown 6.6 percent vs. 1.7
percent growth in 2011, Obama’ s second full year of recovery.
Score one for the Gipper … and for supply-side/Schumpeterian
economics over demand-side/Keynesian economics.

The problem is that Pethokoukis is knocking over a straw man
here. He's defining housing bust purely in terms of housing
construction, while ignoring the real elephant in the room: The
collapse in home prices, and the knock-on effects it has had on
the economy. Almost nobody, when they're talking about the
housing crisis, is talking about it purely in terms of
residential investment (though that is one sub-area).

Lest anyone be confused about what happened, here's a look at the
national House Price Index going back to 1975. As you can see,
home prices didn't even notice the two early '80s recessions.
They collapsed massively, however, starting late in the Bush
administration.

To put it bluntly, this is A Big Deal, and a dynamic not captured
at all merely looking at the residential construction's share of
GDP.

The unprecedented (in post-War America) housing bust also
corresponds with another thing that made this recession unique:
the credit bust.

Here's a look at Consumer Credit going back to 1945. Never had
the U.S. seen a meaningful decline in this measure until this
current malaise.

The point here, again, is that to imagine that the key difference
between the Obama recovery and the Reagan recovery is the falloff
in housing construction is ridiculously narrow.

It's also worth pointing out research which shows a direct
connection between household debt and deleveraging and
unemployment. A study by Professors Amir Sufi and Atif Mian,
which we wrote about
here, uses Mastercard spending data to look specifically at
what happened to unemployment in areas characterized by high home
prices and high household debt before the crisis. Suffice to say,
those areas got hit harder.

We also had one other thing: A financial crisis. Hopefully we
don't need to put up any charts or anything to remind everyone
that much of the financial system seized up in late 2008, and
that we lost multiple major banks, and so on. There are at least
some economists who argue that post-financial crisis
economies experience unusually slow growth for years and years.

So at least right off the bat, we can easily identify some huge
differences between the conditions that Obama inherited and what
Reagan inherited.

But we're just getting started ...

The first, obvious, point is that soon after Reagan entered
office THE U.S. WENT INTO A RECESSION!

For some reason, which we can't figure out, Pethokoukis thinks
Reagan gets to start at 1983.

Ronald Reagan inherited a Long Recession. The economy declined
0.3 percent in 1980, grew at a subpar 2.5 percent in 1981, and
then plunged 1.9 percent in 1982. The lengthy downturn was really
the culmination of more than a decade of bad economic policy. But
the Reagan Recovery was stunning. GDP rose 4.5 percent in 1983
and 7.2 percent in 1984. It was Morning in America, and Reagan
won reelection by a landslide.

If you really want an apples-to-apples comparison, it's hard to
fathom why Reagan doesn't have to answer for a recession
happening so soon on his watch, and why he only gets measured on
those two years. What's more, as you can see in the chart above,
the 1984-1988 period was pretty average, so we're really just
talking about two years of really impressive morning-in-America
growth.

Another thing about Reagan was that he was a deficit-lover.

Reagan presided over the largest (still) one-year annual jump in
the size of the national debt. (And PS: that just happened to
be right after the recession, when the economy started growing
like crazy as Pethokoukis notes)

If you want to look just at annual growth of government spending,
Reagan clearly had more sustained growth than Obama has had. Note
that Reagan never once had a period of shrinking
government spending.

Let's forget government spending though. We've already
established how much Reagan loved it.

What about private investment? After all, that's the sine qua non
of a strong economy, as supply siders like to argue.

Here's a look at annualized change of private spending.

Since the Recession ended, Obama has maintained growth in private
investment. Reagan? He had several negative periods in there, and
overall a lot more volatility on this measure. And as Pethokoukis
even noted above, Obama has had to contend with weak residential
investment, yet private investment is still maintaining nice
growth.

We could of course go on, and point to several other factors in
Obama's favor, such as the fact that tax rates had already been
lowered quite a bit heading into his presidency, taking away one
easy form of stimulus, or the fact that a major trading partner,
Europe, has been in crisis virtually the whole time of Obama's
Presidency, or the fact that Obama faced a Congress who
threatened to cause the U.S. to default, or the fact that
interest rates were ultra-low already, again taking away one form
of stimulus from Obama.

But you get the gist: The conditions behind the Great Recession
were far worse than anything Reagan inherited, and Obama has
pulled off a recovery with less of a sustained growth in Federal
Government spending.